Standard Chartered Bank sees challenges for the Singapore economy this year.

It says growth may be weighed down by the sub-par growth in the US economy, as well as a sharp slowdown in other developed economies.

The British lender has cut its growth projections for Singapore's economy from 5.7 percent to 4.5 percent. This is at the low end of the government's official 4.5 to 6.5 percent range.

Cargo ships will still chug along this year, taking Singapore products overseas.

But Standard Chartered says easing global demand will see exports slow down further, with spillover effects on sectors linked to trade, such as logistics.

The last time the US economy stagnated in 2001, Singapore went into a recession. However, things may not be as bad this time.

Tai Hui, Regional Economic Research Head, Southeast Asia, Standard Chartered, says: "Compared to 2001 when the Singapore economy did go into a recession, the factors are much more positive now.

"You have consumption pattern positive, investment sentiment remaining strong. The domestic demand side of the story this time is much more favourable for the Singapore economy, and that's one reason why we expect the growth to moderate and not plunge."

Singapore's key growth drivers include the services and construction sectors.

StanChart also expects inflation to hit around 4 percent for the full year, most of it to come in the first half.

Tai Hui says: "I think food prices and energy prices will be some of the external factors pushing inflation higher in Singapore. Domestic demand is again very robust. That could give retailers more room to price themselves for profit. Property prices again will be a positive factor driving inflation higher."

Also expected to be higher is the Singapore dollar when compared to its US counterpart, which may temper imported inflation.

However, StanChart sees other domestic prices pressures like rentals and wages. But it believes there may be some government measures to moderate the increases. - CNA/ch